I recently observed an interesting phenomenon: Bitcoin's funding rate has hit its most negative level since 2023. According to Glassnode data, the 7-day moving average has dropped to around -0.005. At first glance, this seems like a bearish signal, but if you look back at history, you'll find that such negative funding rates often precede market bottoms.

The funding rate simply refers to the fee paid by longs and shorts in perpetual contracts, used to keep the contract price close to the spot price. A positive rate indicates bullish sentiment, while a negative rate indicates bearish sentiment. Interestingly, from March to April this year, Bitcoin's funding rate remained negative, yet the price surged from over $60k to around $75k. This divergence of "negative funding rate, rising price" often signals that the market is overly short, and any positive news could trigger a short squeeze.

Looking back at previous bull and bear cycles, this script has played out multiple times. In March 2020, when the pandemic hit, Bitcoin dropped to $3,000; in 2021, during China's mining ban, it fell to $30,000; and in November 2022, after the FTX collapse, it dipped to $15,000. During these times, the funding rate turned extremely negative. Even recently, during the August 2024 yen interest rate carry trade unwind and the April 2025 U.S. tariff sell-off, negative funding rates precisely coincided with market lows.

Currently, the negative funding rate phenomenon is still ongoing. Bitcoin has recently been oscillating higher, but the bearish sentiment remains stubbornly strong. This mismatch between price and sentiment feels like Bitcoin is "climbing a wall of worry," and those accumulated short positions might become the best fuel for the next rally.